After the WTO’s directive allowing the EU to import sugar from Latin America, the production is expected to decline by 2M tons. If to consider higher production expenses in Brazil and alternative use of sugarcane (ethanol production) sugar prices will probably stabilize.
It is more beneficial for Brazil to export its sugar than to distribute it in the domestic market. Last week sugar prices rallied on speculations concerning short-term supply cuts. The market keeps feeling the consequences of Brazil’s production cuts. The sugarcane harvest in the Center-South of Brazil has been poor for the first time in 10 years. The country’s sugar production was equal to 493.5M tons as of Feb 1st 2012 (-11% in comparison with 2011).
Thailand’s sugar production increased by 0.7% during the first 100 days of the current harvesting season. It started on Nov 15th 2011. Since then the production volume has already reached 6.47M tons.
Amid favorable forecasts for India’s sugar exports, sugar prices keep growing. This marketing year India has already exported over 500 00 tons of sugar. The government has recently approved more exports. African countries and Australia are the most active buyers of Indian sugar.
After a prolonged rally initiated by May futures, the global market of sugar started retracing. Earlier this week the ICE raw-sugar futures contract (May delivery) depreciated by 0,9%, thus closing at 25,55 cents per pound ( or $558 per ton). On Wednesday futures traded around local lows as traders adjusted their trades for March contracts in advance of the expiration date.
